Wheat Prices Futures Low on Rising Food Prices and Supply Down

Commodity wheat prices futures fell to the lowest in almost two weeks after the U.S. government yesterday projected record world stockpiles, easing concerns that food prices will rise and weather problems will cut supply. Global wheat stockpiles before the 2012 Northern Hemisphere harvest will climb to 213.1 million metric tons, 6.2 percent more than last year, the Department of Agriculture said. World food costs are down 9.9 percent from a record last year, United Nations data show. Wheat headed for a 2.9 percent weekly drop, after prices jumped 11 percent in the second half of January on concern extremely cold temperatures would hurt crops in Europe.

Wheat supplies are “more than adequate,” Jon Marcus, the president of Lakefront Futures and Options LLC in Chicago, said in a telephone interview. “You’ll see prices continue to drag, at least in the short run. There’s plenty around, so it’s not a concern.”

Wheat futures for March delivery fell 0.7 percent to $6.415 a bushel at 10:24 a.m. on the Chicago Board of Trade. Earlier, the price touched $6.3525, the lowest for a most-active contract since Jan. 30. Wheat is the fourth-largest U.S. crop, valued at $13 billion in 2010, behind corn, soybeans and hay.

Ukraine asked grain traders to limit wheat exports after drought and frosts damaged the winter crop, Volodymyr Klymenko, head of the country’s Grain Association said.

“The ministry asked us not to sign too many contracts for wheat,” Klymenko said in an interview from Kiev today.

The former Soviet state will have to replant almost half of its winter grains with spring crops, Prime Minister Mykola Azarov said today, according to a statement on the government’s website. “We had severe frosts in January and we will have to re-sow 3.5 million hectares (8.6 million acres) with spring grains,” he said.

Ukraine’s Agriculture Ministry estimated about 8.4 million hectares of winter grains, most of which was wheat, was planted for the 2012 harvest. About 1.84 million hectares, of 7.2 million hectares which sprouted, were in good condition, the ministry said yesterday.

Ukraine’s wheat harvest is seen declining to 13.7 million metric tons in 2012, Liza Malyshko, a UkrAgroConsult analyst, said Feb. 7. That compares with last year’s 22.3 million tons, when the country reaped a record 56.7 million ton grain harvest, according to the state statistics office data.

This year, the worst drought in at least 50 years weakened winter grains, most of which is wheat, from September through November. Low temperatures at the end of January and this month caused further damage to plants raising government concerns about meeting domestic demand.

Ukraine reduced its grain exports estimate to as low as 23 million tons for the marketing year started July 1 after drought damaged winter grains for the 2012 harvest, Serhiy Kvasha, head of the agriculture markets department at the Agriculture Ministry, said on Dec. 5. He was unavailable to comment when Bloomberg news phoned his office today.

Grain exports in the country have been restriction free for a little more than a month. Ukraine taxed barley exports from the summer through Dec. 31 and corn and wheat from the summer through October, when the duty was scrapped due to last year’s record crop. Before the summer, the country’s grain exports were limited by quotas for seven months following the summer drought in 2010.

The winter grain damage may be the worst since at least 2003, UkrAgroConsult’s Malyshko said. Ukraine reaped 20.2 million tons that year, the smallest since 1991, when the country got its independence, according to the state statistics data.

Wheat tumbled for a fourth day, heading for the first weekly drop in four, after the U.S. Department of Agriculture predicted that global stockpiles would climb to a record. Corn and soybeans also declined.

Inventories on May 31, before the next harvest, will climb to 213.1 million metric tons, 1.5 percent more than estimated last month, the USDA said yesterday. Analysts surveyed by Bloomberg had expected a drop. The prior record was set in 1999-2000 when stockpiles reached 210.7 million tons. Wheat prices are down 26 percent in the past year.

“Record ending stocks should be bearish,” said Dave Norris, an independent grain broker in Harrogate, England. “We now have more wheat than we did in 1999-2000, the previous record-high stockpiles until yesterday.”

Wheat for March delivery fell 1.1 percent to $6.39 a bushel by 9:53 a.m. London time on the Chicago Board of Trade. The price earlier reached $6.3825 a bushel, the lowest level since Jan. 30. Futures are set for a 3.3 percent decline this week. Milling wheat for March delivery on NYSE Liffe in Paris fell 1.1 percent to 210.50 euros ($279) a ton.

U.S. corn inventories may total 801 million bushels before this year’s harvest, 1.9 percent more than expected by analysts surveyed by Bloomberg News. Global stockpiles at 125.35 million tons were bigger than expected, even after the U.S. Department of Agriculture cut its outlook for Argentina’s crop 15 percent from the prior month to 22 million tons.

Corn for March delivery slid 0.3 percent to $6.3525 a bushel in Chicago. The price has declined 1.4 percent this week. March-delivery soybeans fell 0.5 percent to $12.22 a bushel, dropping for a fourth day.

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